How to Save for an Emergency Fund

Saving for an emergency is one of the building blocks of financial freedom and independence. When you learn how to save for an emergency fund or emergency savings, you are better prepared for the storms of life. Also, having this emergency fund will help keep you from turning to debt in times of need.

This post answers the question about how to save for an emergency fund.

how to save for an emergency fund

We all have storms in life we have to weather. Sometimes, those storms are in the form of a financial emergency. Whether is the car breaking down and needing to be towed (ask me about that one) or the need to fly home due to the death of a loved one, there are all kinds of emergency situations that can take a toll on your budget. But it doesn’t always have to be that way. By learning how to save for an emergency fund, you can create a buffer between you and life so you can avoid taking out more debt.

This post is all about how to save for an emergency fund and why you need one.

How to Save for an Emergency Fund

What is an emergency fund?

An emergency fund is a stash of money that you set aside for unexpected expenses. It typically covers three to six months of your living expenses. It’s important because it helps you avoid debt and financial stress during tough times.

So how do you build an emergency fund?

1. Set SMART goals

smart goals

SMART goals are often talked about in the world of personal and professional development. SMART stands for specific, measurable, attainable, realistic, and time-bound. These are the parameters with which you will create your goal. For example, an okay goal is to say you want to have 6 months of emergency savings. But a SMART goal would be more like, “I will save $7500 into my emergency savings account in the next 6 months.” This satisfies the elements of being a SMART goal.

But how do you know how much to save? This goes back to budgeting. It always does, really. For this exercise, you’ll create a bare-bones budget. All that means is setting up a budget for what it will take for you and your household to survive during an emergency. That emergency could be a job loss or other unexpected drop in income, a medical issue, or car repairs. Either way, using the bare-bones budget, you can figure out how much it really takes for you and your family to live and operate each month.

When you’re creating the bare-bones budget, don’t forget to account for variable items like transportation, groceries, and other things you normally use a sinking fund for. Depending on your sinking fund categories, you might need to drop some from your bare-bones budget. Don’t feel like you have to keep all categories in a time of emergency.

After you’ve created your bare-bones budget, total up everything and see what you need to survive for one month. I recommend starting your emergency savings account with one month of expenses before going on to tackle debt and other goals. This way, you’ll be prepared for one month of an emergency.

Later, you can decide if you want three months or more of emergency funds depending on the stability of your income.

Note: Though not an emergency in every case, you’ll also want to set aside the amount of your car insurance deductible. You’ll likely only use this in case of an accident, but even if the accident isn’t your fault, you may have to pay the deductible and a car rental deposit and then get reimbursed by your insurance company. Yup, that happened to us!

You can keep your insurance deductibles in a separate savings account or roll it into your emergency savings account.

2. Create a separate savings account for emergencies

savings jar

To keep your emergency fund from getting raided, I suggest keeping this in a separate account from other savings goals and separate from your checking account. It should be accessible but not tempting. If you leave it in your checking account, you’ll spend it. Just trust me on that.

If you have the ability to name your accounts at your bank, then definitely take advantage of that so you know at a glance which money is for what.

There are a few options for your emergency savings. Those include a money market checking account, a traditional savings account at your bank or credit union, or a high-yield savings account (HYSA) online or at a brick-and-mortar institution. Avoid stashing your emergency money in a Certificate of Deposit (CD) because you may have to pay a penalty to withdraw the money before the maturation date of the CD.

HYSAs are great because you can earn more from a higher interest rate. But you can generally use an HYSA for any type of savings account, not just for emergencies.

You can find a list of recommended HYSAs here from

3. Make saving a priority

priorities list

Because this is for emergencies, you’ll want to make this a priority for savings before all other savings goals. Yes, even birthdays and Christmas. You may have some debt hanging around you’re desperate to get rid of. I get it, but shore up that emergency account first. Trust me, the debt isn’t going anywhere. Just keep making your payments on time, and you’ll be fine.

Besides, if you don’t have that buffer and an emergency comes for you, you don’t want to dig back into debt unless it’s absolutely unavoidable. That happens too so don’t be too hard on yourself for that.

Once you’ve saved your one month of expenses, resume your debt snowball, avalanche, or hybrid method of debt payoff.

4. Where to get the money for your emergency savings account

cash budgeting wendy coop savvy budget girl

Start with your budget. What can you save each month until you reach your one, three, six, or twelve-month savings goal? Yes, some people want or need to save 12 months of expenses to feel prepared. No shame in that game!

Now that you know how much you can save from your budget, look for other ways to cut expenses and increase your income at the same time. Remember, you can only cut expenses but so far, so be realistic about what you’re cutting out. Most of us can stand to dine out a bit less for a month or so while we get the emergency funds together.

Bring in more money through extra hours at work, signing new clients in your business, taking on freelance work, selling things from around the house, and other creative ways to bring in money. You don’t have to do these things forever, just until you have your emergency account funded.

If you’re stuck for some ways to earn more money, here’s a recent post I did on making $100 in a day: How Can I Make $100 a Day?

5. Use the emergency fund

woman with empty piggy bank
unhappy woman has no more money left to pay bills

It’s there for emergencies, not to act as a savings account in the traditional sense. Don’t hoard the money; just keep what you need in the account.

A few weeks ago my husband wanted to drive his classic VW Beetle to church. I was against it because every time I rode in it, the car broke down. But he was determined so I drove my car separately.

Sure enough, less than a mile from the church, the bug broke down. After church, we arranged a tow back to our house, and it cost a whopping $316.40 – just about the amount left in our savings account. Praise God we had enough money to cover the expense!

But if we hadn’t, we would have been forced to use a credit card and then figure out how to pay that back. Instead, we were able to secure the tow without feeling bad about spending the money. Well, I didn’t feel bad. My husband was a different story!

While using the emergency fund may set you back to zero for a while, you’ve kept yourself out of debt and know how to build your savings.

In the end, it’s always wise for the sake of your sanity and financial well-being to have an emergency fund. You’ll be so glad you did because it’s not a matter of if an emergency will happen, but when.

This post was all about how to save for an emergency fund.

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